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Home/ Questions/Kohler Corporation reports the following components of stockholders equity on December 31, 2013
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kttutoria
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kttutoriaExpert
Asked: April 10, 20222022-04-10T08:11:54+00:00 2022-04-10T08:11:54+00:00In: Accounting

Kohler Corporation reports the following components of stockholders equity on December 31, 2013

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Kohler Corporation reports the following components of stockholders equity on December 31, 2013: 

Common Stock-$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding. $400,000
Paid-in capital in excess of par value, common stock 60,000
Retained Earnings 270,000
Total Stockholders’ Equity $730,000

 

In 2014, the following transactions affected its stockholders’ equity accounts. 

Jan. 1: Purchased 4,000 shares of its own stock at $20 cash per share. 

Jan. 5: Directors declared a $2 per share cash dividend payable on Feb. 28 to the stockholder of record. 

Feb. 28: Paid the dividend declared on January 5. 

July. 6: Sold 1,500 of its treasury shares at $24 cash per share. 

Aug. 22: Sold 2,500 of its treasury shares at $17 cash per share. 

Sept. 5: Directors declared a S2 per share cash dividend payable on October 28 to the September 25 stockholders of record.

Oct 28: Paid the dividend declared on September 5. 

Dec. 31: Closed the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required: 

  • 1. Prepare journal entries to record each of these transactions for 2014. 
  • 2. Prepare a statement of retained earnings for the year ended December 31, 2014 
  • 3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2014.

♦ Relevant knowledge
Stockholders’ equity is capital of the owner in the business. As with all investors they are also obliged to pay a return for their equity. This is known as dividends. Dividends are a distribution of income to shareholders from the accumulated earnings of the business. The majority of dividends are declared and distributed to the number of outstanding shareholders at the time of a record date. Because shares can be issued, reacquired, or reissued and the dividend paid to stock owners declared, and other times, the total number of shares outstanding keeps changing from time to time.

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    kttutoria Expert
    2022-04-17T05:44:16+00:00Added an answer on April 17, 2022 at 5:44 am

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  2. tonytutoria
    2022-04-10T08:11:56+00:00Added an answer on April 10, 2022 at 8:11 am
    1
    Date General Journal Debit Credit
    1-Jan Treasury stock, Common 80,000 =4000*20
    Cash 80,000
    5-Jan Retained earnings 72,000 =(40000-4000)*2
    Common dividend payable 72,000
    28-Feb Common dividend payable 72,000
    Cash 72,000
    6-Jul Cash 36,000 =1500*24
    Treasury stock, Common 30,000 =1500*20
    Treasury stock, Paid-in capital 6,000
    22-Aug Cash 42,500 =2500*17
    Treasury stock, Paid-in capital 6,000
    Retained earnings 1,500
    Treasury stock, Common 50,000 =2500*20
    5-Sep Retained earnings 80,000 =40000*2
    Common dividend payable 80,000
    28-Oct Common dividend payable 80,000
    Cash 80,000
    31-Dec Summary of income 388,000
    Retained earnings 388,000
    2
    KOHLER CORPORATION
    Statement of Retained Earnings
    For Year Ended December 31, 2014
    December 31, 2013, Retained earnings 270,000
    Add: Net income 388,000
    658,000
    Less: Cash dividends declared (152,000)
    Treasury stock reissuances are less (1,500)
    December 31, 2014, Retained earnings 504,500
    3
    KOHLER CORPORATION
    Stockholders’ Equity Section of the Balance
    Sheet
    December 31, 2014
    Common stock – $10 par value 400,000
    Common stock, paid-in capital exceeding par value 60,000
    Contributed capital 460,000
    Retained earnings 504,500
    Equity of total stockholders 964,500
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